Are foreign language films the Academy Awards‘ favorite underdogs, poised to topple the Hollywood behemoths, or are they treated as strange breeds, neglected, outcast, and exiled to an inferior and marginalized area of the Oscars? The answer, of course, is both.

If you take the surprise showing of Fernando Meirelles‘ Brazilian film “City of God,” nominated in four main categories this year (Best Director, Adapted Screenplay, Cinematography, and Film Editing), then it would seem that the Academy loves a foreign long shot. If you consider the surprise exclusion of Fernando Meirelles’s “City of God” in the race for Best Foreign Language Film last year, then it would appear that the Academy doesn’t know how to recognize a good film when it sees one.

The “City of God” situation, along with this year’s more unforeseen Oscar nominees for Best Foreign Language Film (most notably, “The Twilight Samurai” and “Twin Sisters,” which nabbed spots away from such anticipated entries as “Good Bye, Lenin!,”“Valentin,”“Bon Voyage,” and Golden Globe winner “Osama”) further show the schizophrenic way foreign lingo films are treated.

“Since half of the nominated films are odd choices and arguably inferior films, obviously something went wrong,” says Mark Urman, head of distribution for ThinkFilm.

“This category never ceases to surprise me,” says Sony Pictures Classics co-president Michael Barker. “There were more surprising omissions this year than ever before.” While Barker was disappointed that a number of Sony Classics entries did not win Best Foreign Language nominations, he admits, “the one that did” — “Zelary” from the Czech Republic — “was a surprise.”

“The fact of the matter is you have a distinct group of people seeing these movies and they like the idea of discovering pictures,” continues Barker. “That’s why I think a number of these films are surprises. But it could also be that ‘Good Bye, Lenin!’ missed by a quarter of one point of a vote, because from where I sit, there were probably 10-14 movies that could have made the cut.”

And with a record 55 entries for the Foreign Language Oscar, the competition is fiercer — and more prone to surprises — than ever before.

Here’s how the voting system works. Films are randomly divided into three groups (to save the Foreign Language committee from having to see all 55 films). All films show in theaters. (No screeners are accepted.) And the chosen films are those that win the highest average of votes. For example, this year, according to industry insiders, “Twin Sisters” and “The Twilight Samurai” came from the same group; “Zelary” and the Swedish pick “Evil” came from another group; and “The Barbarian Invasions” was the single victor in a third pack. (According to one industryite, with the exception of “Barbarian Invasions,” all of the remaining four nominees played towards the end of the screenings, suggesting, “as they go along, things look better.”)

In one match-up, the Canadian entry Denys Arcand‘s “The Barbarian Invasions,” already tipped to win the Oscar, went up against the Mongolian submission “The Story of the Weeping Camel,” which, although a smaller film, by all counts, was a huge hit with committee audiences, but ultimately, could not compete against the larger Miramax acquisition.

“I received a lot of calls from friends, colleagues, acquaintances, and publicists telling me that ‘Camel” screened uniquely well,” says Urman, of ThinkFilm, which acquired the film after its Toronto Film Festival premiere. However, adds Urman, “Camel” struggled to triumph over films that had played the festival circuit since Cannes and “had imminent openings scheduled,” he says. (“Invasions” opened in late November, in the thick of awards fervor). “While our film came from nowhere in the fall, had no lengthy U.S. festival profile, and no coverage anywhere but in the trades.”

Continues Urman, “As long as there are no uniform standards for selecting the individual official entries, as long as the nominating is done by a committee and not a general membership, as long as the category exists independent of opening date, or irrespective of whether the film even has distribution, it’s going to be filled with aberrations, inequities, oversights, and protests after the fact.”

According to Miramax senior publicity executive Cynthia Schwartz, the reason why “City of God” was overlooked last year also largely has to do with the voting procedures specific to the Foreign Language category. “For the foreign language film, it has to be the five films that everyone liked the most,” she says. “Because it’s such a random system, you can’t really count on a nomination.”

Like “The Story of a Weeping Camel,” the 2002 entry “City of God” was also without the benefit of release buzz. “There was no publicity about it, so people didn’t know it would be acclaimed by the critics,” she says. “All they saw was a violent film. We had 60 walkouts and that brought the average way down.”

However, this year, Miramax’s marketing muscle got behind “City of God” and helped deliver the film to voters in the Academy’s main branches. They held special screenings in September, sent out screener cassettes before Thanksgiving, kept the film in theatrical release for over a year, and took out “For Your Consideration” ads in the trades.

While this could suggest an air of corruptibility (that the main branches of the Academy are more easily swayed by publicity), longtime Oscar-watchers maintain that the reason that foreign films can breakout into the main categories is simply because they’re good. “In the main categories, it is the voters’ first choices that count, so you can have a film that one-fifth of the branch thinks is the best of the year,” says Schwartz. “This system allows for a range of opinions and tastes.”

Sony Classics’ Michael Barker, an Academy member, resists the notion that the Oscars are always about the biggest movies with the biggest campaigns. “Everybody jumps the gun and assumes the Academy members are only interested in the blockbusters,” he says, “but you know what, study the nominations.”

Indeed, from recent wide-ranging foreign-lingo nominees like “Il Postino,”“Life is Beautiful,”“Crouching Tiger, Hidden Dragon” to the six nominations for the German language “Das Boot” in 1983 to the four nominations for an obscure Swedish film called “The Emigrants” (including Best Picture) in 1973 to Akira Kurosawa beating Steven Spielberg for a best directing slot for “Ran” in 1986, “It’s always been the history of the academy to support foreign films,” explains Barker. “The Academy tends to honor quality. Otherwise, there’s no way Pedro Almodovar would have won with ‘Talk to Her’ last year. Everyone was saying, ‘Holy shit, how did it win?’ But I think he won by a lot.”

So while foreign talents like Almodovar and Kurosawa can make a dent in the hallowed sanctum of Oscar’s main categories, the Best Foreign Language Category continues to reflect as much obscurity as it does excellence. As Ryan Werner, Wellspring‘s new head of distribution, puts it, “The four nominations for ‘City of God’ and the nominations for films like ‘Y Tu Mama Tambien’ and ‘Red,’ none of which were nominated for Best Foreign Film, only further show that the process needs re-thinking.”